AerCap reports Q2 results and launches $250m share repurchase program

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AerCap has reported net income of $282.9 million for the second quarter of 2017 compared with $233.3 million for the same period in 2016. The lessor’s net income for the first half of 2017 was $544.1 million. Diluted earnings per share of $1.67 for the second quarter of 2017 and $3.15 for the first half of 2017.

AerCap attributes the increase in net income and diluted earnings per share to higher net gain on sale of assets, higher maintenance rents and lower maintenance rights expense. Diluted earnings per share was also favorably impacted by the repurchase of 32.7 million shares for $1.4 billion from April 2016 through June 2017.

During the second quarter, AerCap executed 108 aircraft transactions, including 25 widebody transactions. The lessor reports 99.5% fleet utilization rate for the second quarter of 2017, $9 billion of available liquidity, adjusted debt/equity ratio of 2.7 to 1, and $53.06 book value per share.

AerCap repurchased 6.5 million shares in the second quarter of 2017 for $293 million and 14.2 million shares year to date through July 28, 2017 for $639 million. The lessor also signed an agreement with Boeing for an order of 30 787-9 aircraft.

In July 2017, AerCap completed the offering of $1.0 billion of 10-year senior unsecured notes with a 3.65% coupon. The lessor has also authorized a new $250 million share repurchase program, which will run through December 31, 2017.

Aengus Kelly, CEO of AerCap, commented: “AerCap completed the second quarter of 2017 with another strong set of results. During the first half of 2017 we generated $3.15 earnings per share and net income of $544.1 million. Our strong operational performance continued with the execution of 108 aircraft transactions during the second quarter. In addition, during the quarter we ordered a further 30 Boeing 787 aircraft, making AerCap the largest customer of the 787 Dreamliner. Most recently we successfully completed an offering of $1.0 billion of 10-year senior notes, further strengthening our financial position. The performance and activities illustrate the continued focus on execution by the AerCap team.”

Basic lease rents were $1,053.5 million for the second quarter of 2017, compared with $1,106.3 million for the same period in 2016. The decrease was primarily due to the sale of mid-life and older aircraft during 2016 and 2017, which reduced average lease assets. AerCap’s average lease assets for the second quarter of 2017 were $34.0 billion, compared with $35.1 billion for the same period in 2016.

Maintenance rents and other receipts were $104.1 million for the second quarter of 2017, compared with $70.9 million for the same period in 2016. The increase was primarily driven by higher end of lease compensation received during the second quarter of 2017.

Net gain on sale of assets for the second quarter of 2017 was $69.5 million, relating to 24 aircraft sold and six aircraft reclassified to finance leases, compared with $38.4 million for the same period in 2016, relating to 32 aircraft sold and three aircraft reclassified to finance leases.

Other income for the second quarter of 2017 was $36.7 million, compared with $23.9 million for the same period in 2016. Other income for the second quarter of 2017 primarily consisted of non-recurring income from lease terminations.

Asset impairment charges were $5.3 million for the second quarter of 2017, compared to $10.5 million recorded for the same period in 2016. Asset impairment recorded in the second quarter of 2017 related to two aircraft that are being sold at a loss but were treated as held for sale because the sale of those aircraft had not been completed as of June 30, 2017. The aircraft were part of an 18-aircraft portfolio that AerCap says is being sold at an overall profit.

Leasing expenses were $136.3 million for the second quarter of 2017, compared with $143.1 million for the same period in 2016. The decrease in leasing expenses was primarily related to lower maintenance rights expense associated with the maintenance activity during the second quarter of 2017. Restructuring related expenses were $4.7 million for the second quarter of 2017, compared with $3.5 million for the same period in 2016. Restructuring related expenses in the second quarter of 2017 and 2016 represented non-recurring charges related to the downsizing of AeroTurbine.

As of June 30, 2017, AerCap’s portfolio consisted of 1,539 aircraft that were owned, on order or managed (including aircraft owned by AerDragon, a non-consolidated joint venture). The average age of its owned fleet as of June 30, 2017 was 7.3 years and the average remaining contracted lease term was 6.4 years.